Follow us
Publications Commentary Research People Events News Resources and Videos About IFS
Home Publications Incentives, shocks or signals: labour supply effects of increasing the female state pension age in the UK

Incentives, shocks or signals: labour supply effects of increasing the female state pension age in the UK

Jonathan Cribb, Carl Emmerson and Gemma Tetlow
IFS Working Paper W13/03

In 1995, the UK government legislated to increase the earliest age at which women could claim a state pension from 60 to 65 between April 2010 and March 2020. This paper uses data from the first two years of this change coming into effect to estimate the impact of increasing the state pension age from 60 to 61 on the employment of women and their partners using a difference-in-differences methodology. Our methodology controls in a flexible way for underlying differences between cohorts born at different times. We find that women's employment rates at age 60 increased by 7.3 percentage points when the state pension age was increased to 61 and their probability of unemployment increased by 1.3 percentage points. The employment rates of the male partners also increased by 4.2 percentage points. The magnitude of these effects, and the results from subgroup analysis, suggest they are more likely explained by the increase in the state pension age being a shock or through it having a signalling effect rather than them being due to either credit constraints or the effect of individuals responding to changes in their financial incentives to work. Taken together, our results suggest that the fiscal strengthening arising from a one-year increase in the female state pension age is 10% higher than a costing based on no behavioural change, due to additional direct and indirect tax revenues arising from increased earnings.

This version of this working paper was published in January 2014 and replaces an earlier version originally published in March 2013.

To note: a published version is now available here

Find out more

IFS Working Paper W14/19
This paper studies the impact on employment over the period when the female state pension age rose to age 62.
Newspaper article
Higher labour force participation of older women is likely to lead to higher earnings for this group, however other aspects of women's wider well-being will be affected.
Press release
Since April 2010 the age at which women can first receive a state pension has been rising from 60 and is due to rise to 66 by 2020. So far this change has had a strong effect in increasing employment among those women directly affected by the reform.